‘Affordability pushes durables’ rural demand’

Nov 22, 2012, 06.07AM ISTTNN

NEW DELHI: Rising discretionary spending and relatively low levels of price rise in consumer durables have made them more affordable to rural households in recent years, a report showed on Wednesday. Yet, the report said, the loss of potential demand for such items due to poor infrastructure was significant.

At least one in every two rural households owned a bicycle , an electric fan and/or a mobile phone in 2009-10 as a result of the increase in discretionary spending, the report by ratings agency Crisil said. Despite rising affordability , the pattern of penetration of consumer durables varied distinctly in rural India — even between states where household discretionary spending was at similar levels. "This clearly indicates that even though higher income is a necessary factor , it is not the sole factor influencing consumers' decisions to purchase durables ," the report said.

The report estimated that nearly 12 million additional rural households in Uttar Pradesh and 4 million more in rural Bihar would have owned electric fans by 2009-10 , had there been better access to electricity. Five million more households in each of these two states would also have owned a television set.

In contrast to relatively poor electricity access, improvement in road connectivity between 2004-05 and 2009-10 appears to have resulted in a sharp pick-up in the ownership of twowheelers in several states, including Bihar, Odisha and Rajasthan, it said. "Therefore , apart from raising rural incomes, boosting rural infrastructure will help unlock the true demand potential for consumer durables," the report said.

In future, while rural households in relatively poorer states could see higher demand for consumer durables , improving access to electricity will play a more critical role in expanding penetration of these goods, the report said. "This will especially hold in states such as Bihar, West Bengal and Uttar Pradesh where higher incomes, in addition to improvement in infrastructure , will be key drivers of potential demand," the report said.

Higher incomes and access to infrastructure will create huge potential demand for ​'Affordability pushes durables' rural demand'durables in these states, which house nearly 33% of rural Indian households . "Considering that an average 22-30 % of rural households in these states own a television or an electric fan, rising incomes and improved access to infrastructure could exponentially raise demand for these items," the report said.